Vietnamese living abroad remitted more than $5 billion to HCM City last year. — File Photo

HA NOI (Biz Hub) — The central bank's recent dollar deposit reduction would not have a negative effect on Vietnamese remittances from overseas because an insignificant amount of the remittances went into savings.

After the central bank's decision to cut the interest rate cap on dollar deposits as of September 29, some were concerned that the move would cause a reduction in remittances sent home by Viet kieu (overseas Vietnamese). Under the decision, the interest rate cap on dollar deposits offered by commercial banks to organisations and companies was cut from 0.25 per cent to zero per cent per year, while the rate for individuals was be reduced from 0.75 per cent to 0.25 per cent per year

However, Nguyen Hoang Minh, deputy director of the State Bank of Viet Nam (SBV)'s HCM City branch, said there would be no effect, while explaining that statistics showed remittances flowing into production and business accounting for more than 70.6 per cent of the country's total remittances. Another 20.7 per cent went into real estate investment and 6 per cent to 7 per cent were for Viet kieu's relatives for consumer purposes such as medical treatment or tourism.

Besides, Minh is also optimistic about the inward remittances to the country next time to invest in the warming real estate market as the government has so far allowed foreigners to own houses in Viet Nam.

Overseas Vietnamese remittances to HCM City, which has been one of the top localities nationwide receiving the biggest volumes of remittances, in the first nine months of the year totalled US$3.25 billion, according to the SBV's HCM City branch.

The amount is expected to hit $5.5 billion this year thanks to the recent favourable adjustment of exchange rate, the recovery of local businesses and the warming real estate market.

Tran Van Trung, director of Dong A Bank's Remittance Co, said his company targeted a remittance growth rate of 15 per cent to 20 per cent this year. Last year, remittances to the company reached $1.6 billion, up 10 per cent against the previous year.

Besides the traditional markets of the United States, Australia and Canada, where there are many Viet kieu, his company will also focus on new markets such as Japan and Malaysia, which are Viet Nam's large labourer export markets.

Sacombank, meanwhile, targeted a remittance of $1.9 billion this year, equal to that of last year.

According to Vo Tri Thanh, deputy director of the Central Institute for Economic Management, remittances play an important role in the nation's economic development and macro-economic stability.

Vietnamese living abroad remitted more than $5 billion to HCM City last year, 4.2 per cent higher than in 2013, according to city's Committee for Overseas Vietnamese.

Between 1993 and 2014, Viet Nam received total remittances of about $96.66 billion, with an average remittance of $4.4 billion per year, accounting for 6.8 per cent of the country's gross domestic product (GDP) over the period.

Remittances into Viet Nam have increased about 22.4 per cent annually in the past two decades, with an exception in 1997 and 2009 when economies in the world faced a financial crisis. — VNS